American brokerage Bofa Securities on Thursday hinted towards more pain in store for investors in Indian equities with a call for the benchmark indices to correct 10 per cent more by December 31.
The brokerage said the 50-share benchmark Nifty will be at 15,600 points by the year end.
However, when compared to the brokerage's own call in June, this is an upward revision of the target because it had previously estimated the Nifty at 14,500 points.
Markets have seen some buying lately with the return of foreign portfolio flows, after a sustained sell-off which saw the foreign portfolio investors pulling out over $29 billion.
"We remain cautious on markets on the current volatile environment and looming global recession concerns as reflected by consensus downgrading Nifty FY23/24 earnings," its analysts said in a note.
Admitting that there are risks of further earnings cut, the brokerage pointed out to some positives as well, which include moderations on high crude prices, rupee depreciation and domestic inflation.
The brokerage said it is underweight on stocks in the external/export driven sectors such as materials and select discretionary, and neutral on information technology sector.
It is "constructive" on companies in the domestic cyclicals and consumption space, and "overweight" on industrials, financials, autos and staples.
Comparing its calls to consensus estimates, the brokerage said it expects financials to surprise as the earnings are supported by credit growth and improved yields on assets.
It expects communication services, materials and utilities to lag the consensus estimates in FY23/24, and pointed to the drag from 5G capex plans and inflationary pressures for its call.